Oshkosh, BioScrip price; new Micron, American Greetings bonds firm; funds plunge $972 million

By Paul Deckelman and Paul A. Harris

New York, Feb. 6 - The high-yield primary market quieted down on Thursday after busier sessions earlier in the week. Issuers priced just two small deals totaling $450 million of new dollar-denominated, fully junk-rated paper.

Oshkosh Corp., a specialty vehicle and equipment manufacturer based in the Wisconsin city of the same name, drove by with a $250 million issue of eight-year notes.

Meanwhile, BioScrip, Inc., an Eden Prairie, Minn.-based health-care company, did $200 million of seven-year notes as a regularly scheduled forward calendar deal.

Although both issues are relatively small by usual junk bond standards, they attracted aftermarket interest with each gaining a point or more when they began to trade.

Market participants also saw healthy interest in the new bonds from Micron Technology, Inc. and American Greetings Corp. Both had priced fairly late in the day on Wednesday and did not move into the aftermarket until Thursday morning, when they firmed smartly.

Traders said that the overall market was well bid for, although they said some investors were holding back ahead of the scheduled Friday morning announcement of January's jobless rate and new-jobs creation numbers.

Statistical market-performance indicators were seen better across the board Thursday after two prior mixed sessions.

But another indicator - the flow of cash into and out of high-yield mutual funds and exchange-traded funds, considered a key barometer of junk market liquidity trends - was strongly negative for a second straight week.

Funds lose $972 million

As Thursday's Junkbondland activity was drawing to a close, market sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that $972 million more left high-yield mutual funds and ETFs than had come into them in the week ended Wednesday.

It was the second consecutive large downturn seen by Arcata, Calif.-based AMG, a unit of the Lipper analytics division of Thomson Reuters Corp., coming on the heels of a $909 million cash loss recorded the week ended Jan. 29.

A market source said that as had been the case the week before, most of the outflow was attributable to cash that gushed out of the ETFs, which have emerged over the past several years as a favored investment vehicle for volatile, fickle "hot money" investors. The more traditional high-yield mutual funds accounted for a relatively small percentage of the outflows in both weeks.

The twin downturns, totaling $1.88 billion according to a Prospect News analysis of the numbers, have been the first outflows seen so far this year and follow the three consecutive inflows with which the year opened, totaling about $1.13 billion, the analysis said.

The latest week's outflow was big enough to swing the cumulative net 2014 fund-flows total into the red for the first time. The funds show a net outflow since the start of the year of $751 million, versus the previous week's cumulative net inflow total of around $221 million, according to the analysis.

In 2013, inflows were seen in 33 weeks, versus 20 weeks of outflows, with total net inflows for the year tallying up to about $1.27 billion, according to the analysis.

Cumulative fund-flow estimates may be revised upward or downward or may be rounded off and could include unannounced revisions and adjustments to figures from prior weeks.

Analysts said that the sustained flows of fresh cash into junk - and the mutual funds and ETFs represent but a small, though very observable and quantifiable percentage of the total amount of investor money coming into or leaving the more than $1 trillion junk market - has been a key catalyst behind relatively strong performance seen by both the junk primary and secondary markets over the past two years and which continued on into 2014.

Oshkosh drives by

The high-yield primary market news flow was thin on Thursday. Two issuers completed single-tranche debt refinancing deals to raise a combined total of $450 million.

One deal came as a drive-by. The other ran a roadshow.

Both executions appeared crisp, with yields coming at the low end of talk.

Oshkosh priced a $250 million issue of eight-year senior notes (B1/BB+) at par to yield 5 3/8%.

The yield came at the tight end of yield talk in the 5½% area.

J.P. Morgan Securities LLC, BofA Merrill Lynch, RBS Securities Inc. and Wells Fargo Securities LLC were the joint bookrunners for the quick-to-market deal.

BioScrip prices tight

BioScrip priced a $200 million issue of seven-year senior notes (Caa2//) at par to yield 8 7/8%.

The yield printed at the tight end of the 8 7/8% to 9% yield talk.

Jefferies LLC was the left bookrunner. SunTrust Robinson Humphrey Inc. and Morgan Stanley & Co. LLC were the joint bookrunners.

Hunt does roadshow

A debt capital markets banker professed visibility on a couple of deals that should come to market during the week ahead but allowed that currently business is slow in the high-yield primary market.

"It's no real surprise because there is no real pipeline to speak of right now," the source remarked.

The Thursday session brought news of one roadshow start.

Hunt Cos. set out with a $525 million offering of non-rated seven-year notes via bookrunner Jefferies.

The deal, which is in the market as a Regulation D private placement, is set to price on Monday.

The notes will be exchanged into Rule 144A and Regulation S notes upon closing.

The El Paso-based real estate company plans to use the proceeds to repay debt, to fund current and future acquisitions and for general corporate purposes.

Meanwhile, books were scheduled to close Thursday on the Lansing Trade Group's $175 million offering of seven-year senior notes (B3/B+).

The deal, which is being led by Macquarie, was talked earlier in the week at 8¾% to 9%.

No final terms were available at press time, according to market sources.

Lowen Play prices atop talk

The euro-denominated primary market, which has been notably quiet during the week, burst to life on Thursday.

Lowen Play GmbH priced a downsized, restructured €235 million issue of 8¼% seven-year senior secured fixed-rate notes (B2/B) at 99 to yield 8.442%.

The deal was downsized from €265 million.

The coupon and reoffer price came on top of talk.

The notes were restructured to feature a fixed-rate coupon instead of the previous floating-rate structure.

The maturity of the notes was increased to seven years from six years. Call protection was extended to three years from two years.

Joint bookrunner Jefferies International Ltd. will bill and deliver. Credit Suisse Securities (Europe) Ltd. was also a joint bookrunner.

Proceeds will be used to repay debt and shareholder loans.

Fresenius gets reverse inquiry

Reverse inquiry prompted Germany's Fresenius Finance BV to bring a €150 million add-on to the 4% senior notes due Feb. 1, 2024 (Ba1/BB+) that it priced just over a week ago, an informed source said.

The tap came at 102 to yield 3.758%.

The drive-by deal came without official price talk.

Deutsche Bank, BNP, Credit Suisse and Royal Bank of Scotland were the joint bookrunners.

The Bad Homburg, Germany-based medical equipment company plans to use the proceeds to partially fund the acquisition of hospitals from Rhoen-Klinikum AG.

The original €300 million issue priced at par on Jan. 28.

That deal, which was upsized from €200 million, had been talked, investment-grade style, at a spread to mid-swaps of 205 basis points to 225 bps but ultimately came inside of that range at 201 bps.

The demand that drove Fresenius back into the euro-denominated new issue market just nine days after the original deal priced helped the company to realize an interest savings of 24 bps versus the original print.

A better market

In the secondary realm, a trader said that "stuff was better bid for."

A second opined that "things look like they were moving along pretty well."

He noted that with all eyes sure to be on Friday morning's scheduled release of the January jobless rate and jobs-creation numbers by the Labor Department, Friday "is going to be a big day.

"Guys were trying to situate themselves [ahead of the numbers]. There wasn't much in the calendar that people could dig into."

He said that "a lot of people had 'offereds-wanted' lists out, looking for longer [duration] paper. I haven't seen this much in a while, so the market definitely was pretty firm."

Day's new deals do well

A trader said that he'd heard the new Oshkosh issue of 5 3/8% notes due 2020 "was doing pretty well" in the aftermarket, although he had not seen any quotes.

At another desk, however, a trader pegged the specialty vehicle manufacturer's new notes at 101¾ bid, 102 1/8 offered.

He meantime saw BioScrip's 8 7/8% notes due 2021 at 101 bid, 101½ offered.

A second trader had predicted that "it's going to do well" when it began trading around.

Older deals holding gains

Among the notes that came to market earlier in the week, a trader said that Micron Technology's 5 7/8% notes due 2022 traded as high as a 102 to 102¼ context before moderating a little to end the day at 101¾ bid, 102 1/8 offered. That was well up from the par level at which the Boise, Idaho-based semiconductor devices manufacturer's $600 million deal priced on Wednesday, after having been upsized from $500 million originally.

At the same time, American Greetings' 9¾%/10½%PIK toggle notes due 2019 were seen by a trader "doing really well." He saw the Cleveland-based greeting-card manufacturer's $285 million issue last quoted around 102½ bid - a solid gain over the 99 level at which the notes priced on Wednesday to yield 10.01%, after upsizing from $275 million originally.

A trader at another shop also saw the bonds at 102½ bid.

A trader noted that Regency Energy Partners LP's 5 7/8% notes due 2022 "were trading up at 101 today," a gain of ¼ to ½ point on the session. But he said that while there was a respectable amount of volume in the credit - topping the $15 million mark by mid-afternoon, good enough to make the day's Most Actives list - "it's not the flurry of activity we saw on Wednesday," when an astounding $116 million of the Dallas-based master energy limited partnership traded, easily the busiest bond of the day.

"It's a decent company," another trader said in speculating on why activity in the notes, which priced at 98.423 on Tuesday to yield 6 1/8%, was so intense on Wednesday.

Market indicators turn better

Apart from trading in the new deals, a trader said, "nothing really jumped out. I think a lot of people are waiting for the employment numbers tomorrow. So the market just kind of orbits where it is right now."

Statistical junk-market performance indicators improved across the board on Thursday after having been mixed the previous two sessions.

The Markit Series 21 CDX North American High Yield index gained 21/32 point to finish at 106 13/16 bid, 106 7/8 offered. On Wednesday, it had been virtually unchanged after having risen by 11/32 point on Tuesday, when it snapped a two-session losing streak.

The KDP High Yield Daily index's four-session slide meantime came to an abrupt end on Thursday as the index rose by 8 bps to close at 74.34 - the mirror-image of Wednesday's 8 bps retreat.

Its yield came in, also for the first time after having risen the previous four sessions. It tightened by 4 bps to 5.62% after having widened out by 3 bps on Wednesday.

And the widely followed Merrill Lynch High Yield Master II index posted its second consecutive gain on Thursday, rising by 0.154% after having gained 0.037% on Wednesday to pull out of a three- session skid.

The gain raised its year-to-date return to 0.810%, up from Wednesday's finish at 0.655%, though it was still well down from the 1.185% it had reached on Jan. 22, its high point of the year so far.

The index's yield to worst declined to 5.681% from Wednesday's 5.731% and from Tuesday's 5.735%, its peak level for the year so far. Those levels remained well above the low yield for the year, 5.386% on Jan. 22.

Its spread to worst tightened to 435 bps over comparable Treasuries, in from 441 bps on Wednesday and from Tuesday's 444 bps, the wide point for the year so far. Those levels remained well above the tight spread for the year, 398 bps on Jan. 22.

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